Foreign investment in China: the ‘world’s factory’

Over the past few decades, China has grown at a phenomenal rate to become the second richest country in the world and the global hub for manufacturing and export. The Chinese market is ambitious and eager to compete with the rest of the world. With that aim, the Chinese government-backed ‘Made in China 2025’ initiative can only boost an already booming economy. Financial markets are notoriously sensitive, and with the political unrest in the EU and potential nervousness regarding the US presidential election possibly causing fluctuations in those markets, now is a great time to invest in China. Can you make China’s initiative work for you?

‘The world’s factory’

Financial experts agree that China is increasing its impact on the world economy. Previously thought of as a difficult market to access, since opening up to foreign direct investment (FDI) in 1979, the Chinese economy has grown faster than any other, even outdoing India. Ranked second in Investopedia’s list of the world’s top economies, China is considered the world’s largest exporter, often described as ‘the world’s factory’ for the sheer quantity of goods it produces and exports. At the core of ‘Made in China 2025’ is an ambitious plan to take China’s manufacturing to yet another level.

China’s population is the largest in the world. This makes it a great place to invest. Not only are there many potential customers but there are also a lot of potential employees. In fact, many experts consider China’s large workforce central to its rapid growth. Economic stability and the Chinese government’s forward planning is another attractive factor in China’s favour: ‘Made in China 2025’ began in 2015, so it represents a 10-year period of government investment and growth.

Manufacture of medical devices is one sector that shows rapid growth. Chinese medical device registration is regulated by National Medical Products Administration (NMPA); all medical devices used in China, whether manufactured there or imported, are subject to NMPA’s regulations. How is this relevant to investing? Estimates vary, but economists think that in 2019, China’s manufacture of medical devices was massive, with the industry employing hundreds of thousands of people and an astonishing number of businesses operating in the sector. This upward trend is expected to continue in 2020 and beyond.

Wading through figures and picking which of the new businesses to invest in can be daunting, especially when you factor in the different business laws and political structure. Many investors use an investment service with lists of companies across China looking for foreign investors and work as an intermediary to introduce you to the right business partner.

In August 2019, the Chinese government announced it would increase financial investment in China’s health sector, aiming to make it ‘a pillar industry in the economy’. Predictions for this sector were already very strong, and this boost is only going to help. So now is the time to look at investing in Chinese healthcare manufacture.

Before you leap

There is plenty of advice available for investors to help minimise the risks, and finding a good partner is essential. In Finance Girl’s beginners guide to investing, it is important to first research investment lingo, set goals, and choose wisely where to invest. There are always risks involved in investing, so carefully consider your financial situation and do your homework before you commit. With the right planning, the profits of China’s surge will be yours.